2020 (7) TMI 175 - AT - Income Tax

Tribunal allows appeals for detailed examination of business transactions under Income Tax Act

N. Padmaja, Hyderabad. Versus Dy. Commissioner of Income-tax, Circle - 3 (2), Hyderabad.

The Tribunal allowed the appeals for statistical purposes, remanding the matter to the AO for a detailed examination of the business transaction claimed ... Reopening of assessment u/s 147 - addition u/s 69A - as per CIT-A even if the above addition is deleted, it is still liable to be taxed u/s 2(22)(e) - HELD THAT:- The assessee had stated that she is the Managing Director of the SPRIIL and that advance to the extent of ₹ 30,89,000/- was received for purchase of plot by the said company from the assessee and, therefore, provisions of section 2(22)(e) are not applicable. CIT(A), thereafter, did not examine the business exigency or the purpose for which the assessee has received the advance from SPRIIL, but, has given a finding that the amount is liable to tax u/s 2(22)(e) of the Act also. Since the evidence filed by the assessee before the Tribunal is additional evidence and it goes goes to the root of the matter, I deem it fit and proper to admit the same and since the additional evidence was not filed before the authorities below, due to which, there was no occasion to examine the same by the AO and CIT(A), remand the matter to the file of the AO with a direction to examine the business exigency of the advances of ₹ 30,89,000/- received by the assessee and decide the issue in accordance with law after giving fair opportunity of hearing to the assessee. Accordingly, ground raised by the assessee is treated as allowed for statistical purposes. Issues:1. Rectification of the order by ITAT regarding taxation of advance received by the assessee.2. Addition made under section 69A of the Income Tax Act.3. Alternative ground raised by the assessee regarding taxation under section 2(22)(e) of the Act.4. Admission of additional evidence by the assessee.5. Business transaction claim by the assessee.6. Discrepancy in treatment of the advance received by the assessee.Issue 1: Rectification of the orderThe appeals were initially disposed of by ITAT, but both the revenue and the assessee filed MAs seeking rectification of the order. The Tribunal dismissed the MAs filed by the Revenue but later recalled the order to adjudicate the alternate ground raised by the assessee regarding the taxation of the advance received.Issue 2: Addition under section 69AThe assessee had made cash deposits into her bank accounts, claiming it to be an advance received towards the proposed sale of property. However, failing to provide details, the AO treated it as unexplained money and brought it to tax under section 69A of the IT Act.Issue 3: Taxation under section 2(22)(e)The CIT(A) confirmed the addition made under section 69A and mentioned that even if the sources were from another entity, the amount is liable to be taxed under section 2(22)(e) of the Act. The Tribunal was to decide the alternate ground raised by the assessee regarding this taxation.Issue 4: Admission of additional evidenceThe assessee submitted additional evidence before the Tribunal, claiming the transaction with the other entity was a business transaction. The Tribunal admitted the evidence, remanded the matter to the AO to examine the business exigency of the advance received, and decide the issue accordingly.Issue 5: Business transaction claimThe assessee argued that the advance received was for a business transaction, as the company intended to purchase a plot from her. The assessee, being a director of the company, provided her personal property as collateral security for a loan taken by the company.Issue 6: Discrepancy in treatmentThe AO initially made the addition under section 69A, but later proposed an addition under section 2(22)(e). The CIT(A) did not consider the business exigency of the advance received, leading to the Tribunal remanding the matter for further examination by the AO.In conclusion, the Tribunal allowed the appeals for statistical purposes, remanding the matter to the AO for a detailed examination of the business transaction claimed by the assessee and the taxation implications under the relevant sections of the Income Tax Act.